Streaming services are increasing in popularity in developing countries such as India and Indonesia, and these countries show a particular liking for Netflix' series. However, the income level in these countries poses a challenge to Netflix. Despite a strong desire to use streaming services like Netflix, the income level results in a very low willingness-to-pay. Even when running a deficit in these markets, Netflix' price still seems too high to penetrate the market, and local media companies are starting to steal market share.
Netflix CEO, Reed Hastings, has stated that Netflix will not offer ad-supported plans to these countries, despite several suggestions that it would be the wise thing to do -- certainly, it would enable Netflix to grow its market share while generating some profit.
Netflix' Strategy They know they need to do something to become sustainable in the long run -- and since they cannot really influence the income level in these countries, they need to provide additional value, which is exactly what they're trying to do. In developing countries, Netflix users tend to use mobile devices for streaming, which Netflix is trying to accommodate by creating arrangements with providers of mobile data, so Netflix usage is exempted for data usage charges. Moreover, Netflix is trying to provide more content in the local languages, which is currently the biggest competitive advantage for local media outlets. Currently, roughly 20% of Netflix content is in local language in international markets, but for developing countries, Netflix aims to offer a much higher percentage.
Even if you are not operating in a developing country, you may very well be in a situation similar to Netflix, where lowering prices is bad for business, and you need to find ways to create value instead. Like Netflix, you should understand how your customers use your product or service, and use this insight to develop it in a way that will increase their willingness-to-pay and justify your pricing.
Readers of this blog will find a wealth of articles about price optimization, price research and willingness-to-pay analysis. PriceBeam offers scientific as well as fast and cost-effective price research.